EUR 103.27 For Business Accounts Only

BGC Partners: Implications of new support measures on the consolidated budget

IMPLICATIONS OF SUPPORT MEASUERES: Given the generous fiscal spending ahead of presidential elections in 2018, investors have been wondering if a similar scenario can be repeated ahead of local elections in 2019. We calculate the combined effect of the expenditure measures to be around TL18.3bn or 0.42% of the GDP, assuming SCT and VAT related breaks last for only three months. If for some reason incentives last until the year end 2019, the impact would be TL26.6bn or 0.60% of GDP. However, paid military service and building permit amnesty should yield TL15bn (or 0.34% of GDP) additional revenue in 2019 on our estimates, limiting the net effect to TL11.6bn or 0.26% of the GDP even if the tax breaks remain throughout 2019. We estimate the support measures via the banking sector to have a relatively small TL1.9bn (or 0.04% of GDP) negative impact on the budget while amendments to CGF should save around TL2.5bn. Therefore worries on fiscal slippage ahead of local elections remain unwarranted and continue to project consolidated budget deficit to be 2.0% of GDP in 2019.